Environmental Economics: Concepts, Methods and Policies

Environmental Economics explores the ways in which economic theory and its applications, as practised and taught today, must be modified to explicitly accommodate the goal of sustainability and the vital role played by environmental capital. Pivoting around the first and second laws of thermodynamics, as well as the principles of ecological resilience, this book is divided into five key parts, which include extensive coverage of environmental microeconomics and macroeconomics. It drills down into issues and challenges including consumer demand; production and supply; market organisation; renewable and non-renewable resources; environmental valuation; macroeconomic stabilisation and international trade and globalisation. Drawing on case studies from forestry, water, soil, air quality and mining, this book will equip readers with skills that enable the analyses of environmental and economic policy issues with a specific focus on the sustainability of the economy. This new edition has been updated throughout and provides further coverage on topics such as energy transition, market organisation and the role of environmental economics in regulatory decision-making including critiques of contemporary policy directives like tradable pollution permits and net zero emissions. Challenges to achieving stabilisation and emission reduction have been expanded to include wars and conflicts such as those in the Middle East and the Russian invasion of Ukraine. This book further reinforces the premise that there are clear limits to growth and that modesty and moderation are superior alternatives. Rich in pedagogical features, including key concept boxes and review questions at the end of each chapter, this book will be a vital resource for upper-level undergraduate and postgraduate students studying not only environmental economics/ecological economics but also economics in general.

Table of Contents:
List of Figures List of Tables List of Boxes Preface Acknowledgements PART-I. NATURE-CAPITAL (KN) AND THE ECONOMY 1. KN AND ECONOMICS Environmental Economics and Economics KN and Limits to Growth KN issues of contemporary times Climate change – The issue of this century The organisation of this text REFERENCES 2. THE ECONOMIC SYSTEM REVSED The Economic System: Standard Version The Economic System and Materials Balance The Economy and the Entropy Law Further Adaptations of the Economic System Equilibrium in the Adapted System Concluding Remarks REVIEW QUESTIONS REFERENCES PART-II. MICROECONOMICS AND KN 3. THE MARKET MODEL AND ITS FAILURE The Functions of the Market Market demand Market supply The market KN Goods and Market Failure Price Mechanism and Property Rights Some Further Issues REVIEW QUESTIONS REFERENCES 4. PUBLIC GOODS AND EXTERNALITIES Public Goods Externalities Public Goods and Externalities Residual Externalities REVIEW QUESTIONS REFERENCES 5. ECONOMICS OF RENEWABLE AND NON-RENEWABLE RESOURCES Objectives of Resource Management Conflicts between EG and KN-Q Objectives The framework based on the market model The framework for conflicts between groups Conflicts Due to Intergenerational Concern A framework for non-renewable resources A framework for renewable resources Some Resource Management Policies Renewable resources Non-renewable resources REVIEW QUESTIONS REFERENCES 6. ECONOMICS OF NON-RENEWABLE RESOURCES WITH RENEWABLE SERVICES A Simple Framework for Pollution Control Standards Taxes and charges Emissions Trading Net Zero Emissions Other Incentives and Disincentives REVIEW QUESTIONS REFERENCES 7. CONSUMER DEMAND AND KN Utility Functions, Indifference Curves and Demand The standard theory Adapting the Standard Theory for Effects pertaining to KN Pertinent assumptions The elicitation of demand curves The Market Demand Curve and KN Effects Elasticity of Demand and KN Concluding Remarks REVIEW QUESTIONS REFERENCES 8. PRODUCTION, COSTS SUPPLY AND KN The Production Function and KN Production and Assimilative Capacity Desired output and the generation of entropy Transfer of entropy and time Isoquants, Substitution, and Input mixes Analysis of Costs Implications REVIEW QUESTIONS REFERENCES 9. MARKET ORGANISATION AND KN Perfect Competition and Sustainability PC versus PCS and Preference Relations Monopoly Oligopoly Monopolistic Competition Perfect Information and Full Employment of KN Concluding Remarks REVIEW QUESTIONS REFERENCES PART-III. MACROECONOMICS AND KN 10. SOME IMPORTANT CONCEPTS IN MACROECONOMICS National Product Real Values and Price Level Indexes Final Expenditures Economic Performance and Goals of Macroeconomics Measurement of NP The Relationship between NP and Inflation QNP measured as the sum of real final expenditures QNP measured as the sum of real incomes AD–AS Framework Concluding Remarks REVIEW QUESTIONS REFERENCES 11. KN: INVESTMENT AND DEPRECIATION KN and the Economy Distinguishing KN Investments from Depreciation of KN KN investments Depreciation of KN Sustainable Income A Conceptual Framework for DKN(t) Some Empirical Evidence Concluding Remarks REVIEW QUESTIONS REFERENCES 12. ENVIRONMENTAL MACROECONOMICS: SHORT-RUN ANALYSIS-I Equilibrium Income without DKN Equilibrium Income with DKN: Linear Framework Equilibrium Income with DKN: Non-linear Framework Income Determination and Policy Analyses United States China Indonesia and Vietnam Mongolia Further Thoughts on DKN and KN Investments Concluding Remarks REVIEW QUESTIONS REFERENCES 13. ENVIRONMENTAL MACROECONOMICS: SHORT-RUN ANALYSIS-II The Standard Framework Production function (factor utilisation) Aggregate supply (AS) Aggregate demand (AD) Display of the standard framework The Environmental Macroeconomic Framework Reformulated production function (factor utilisation) Reformulated AD–AS framework Display of the environmental macroeconomic framework Concluding Remarks REVIEW QUESTIONS REFERENCES 14. ENVIRONMENTAL MACROECONOMICS: LONG-RUN ANALYSIS Introduction The Steady State The Harrod-Domar (H-D) Growth Model The standard version of the H-D growth model The H-D model revised with KN The Swan-Solow Model The standard version of the Swan-Solow model The revised version of the Swan-Solow model Endogenous Growth Models The Romer Model The Generalized Endogenous Growth Model An Illustration – The South Korean Economy Conclusions REVIEW QUESTIONS REFERENCES 15. INTERNATIONAL TRADE AND GLOBALISATION Comparative Advantage and Specialisation The Factor Endowment and Trade Framework The standard framework The revised framework Trade Framework based on the Market Model The Market for Foreign Exchange Global Issues and the Need for a Global Paradigm Concluding Comments REVIEW QUESTIONS REFERENCES PART-IV. VALUATION 16. VALUATION OF KN: MICROECONOMIC BASIS The Basis for Valuation Methods Based on Demand: KN as a Consumption Good Contingent valuation method (CVM) Choice modelling (CM) Travel-cost method (TCM) Game theory methods Methods Based on Demand: KN as an Input in Production Hedonic prices Dose-response methods Dose-response methods Direct estimation of OCs Replacement costs Cost savings Threshold values Concluding remarks REVIEW QUESTIONS REFERENCES 17. VALUATION OF KN: MACROECONOMIC BASIS – I Use Value of KN in Macroeconomics Illustration of the Use Values of KN and the Scarcity of KN The Relative Scarcity of KN The efficiency of utilisation with respect to KN Concluding remarks REVIEW QUESTIONS REFERENCES 18. VALUATION OF KN: MACROECONOMIC BASIS – II Stocks and Flows of KN The Perpetual Inventory Method (PIM) Adapting the PIM for KN Empirical illustration Conclusion REVIEW QUESTIONS REFERENCES PART-V. POLICY 19. POLICIES FOR SUSTAINABLE DEVELOPMENT Policies Aimed at Reducing Damages Taxes and subsidies Regulation and tradable permits Commodity prices, interest rates and wages Product differentiation Education attitudes and lifestyles Population pressures Property rights and land reform Improving the productivity of KN Policies Aimed at Minimizing KN Damages towards Zero and Restoring KN Closed-loop production systems Bio-mimicry Changing the fundamental nature of the business model Restore and expand KN assets Overarching Policies – Social Capital (KS) – A Precondition Concluding Remarks REVIEW QUESTIONS REFERENCES 20. AN ENVIRONMENTAL ECONOMICS FOR SUSTAINABILITY The Premises for Sustainability Building KN into Economic Models The Need for a New Kind of Policy REFERENCES Index

About the Author :
Dodo J. Thampapillai is an honorary professor in the School of Natural Sciences at Macquarie University, where he previously held a personal chair in environmental economics. He is currently a senior fellow in executive education at the Lee Kuan Yew School of Public Policy, National University of Singapore, where he was previously a professor. He also held Visiting Professorships/Fellowships at Simon Fraser University, Swedish University of Agricultural Sciences, Christian Albrechts University of Keil and the Australian National University. Dodo Thampapillai has been teaching economics and environmental economics for over 50 years leading him towards a serious rethink of how economics is taught and practised. Matthias Ruth is Pro-Vice-Chancellor for Research at the University of York, York, United Kingdom. He previously served as Vice-President for Research and Innovation at the University of Alberta, Canada and in various other leadership positions in the USA and with academic appointments in numerous fields, including economics, engineering, geography, public policy and urban affairs. His research focuses on dynamic modelling of natural resource use, industrial and infrastructure systems analysis and environmental economics and policy. His theoretical work heavily draws on concepts from engineering, economics and ecology, while his applied research utilises methods of non-linear dynamic modelling as well as adaptive and anticipatory management. Applications of his work cover the full spectrum from local to regional, to national and global environmental challenges, as well as the investment and policy opportunities these challenges present.